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  • ULI Moving Cooler Report: Greenhouse Gases, Exaggerations and Misdirections

    Yesterday a group of environmental advocacy groups, foundations and other organizations released a report, Moving Cooler, amid much fanfare, seeking to have us believe that it is a serious study of GHG reduction options in the transportation sector. It is immensely disappointing. The world could use a dispassionate, objective and broad-based assessment of petroleum reduction options as well as their positive and negative consequences. This is not it.

    As one reads one can’t help but feel that you are being hit with a sales pitch, or a legal brief from advocacy groups and those who would benefit financially from the derived policy options. The main point, amidst all the array of statistics, confirms the dogma of the already convinced that the only solution to greenhouse gases is major re-structuring of society.

    These notions, critically, were already on the front burner of these same groups long before the climate change issue came to prominence. “Progressive” foundations, new urbanists, planners and urban landowners long have advocated the re-assembly of urban living into high density transit-oriented bikeable/walkable communities. Even though their numbers as reported in the text don’t bear it out, the rhetoric is all focused towards that end and the pricing out of existence the automobile and all the evils it represents: suburban living and long trips.

    This is a report meant to be waved rather than read as the Congress goes about its fulminations in the coming months. It understates the prospect of gaining the full potential of greater energy efficiency from the vehicle fleet – the only way to justify the wholesale reorganization of society. In fact, if the vehicle/fuel assumptions had been as comparably optimistic as the land use assumptions, with a robust and honest assessment of fuel and vehicle technological development opportunities, one wonders whether this report would be worth doing at all.

    We have been here before. In the struggle to improve air quality, it turned out that the solution was not so much changing people’s behavior as it was technological – largely the improvement of fuel and vehicle technology. In the 1970s we were told we could not have cleaner air and automobiles; yet in fact that’s exactly what happened, without having to heed a sermon about our need to repent and change our suburban, car-driving ways. Some people just have a penchant for telling others how to live.

    Maybe the saddest part of it all, the authors appear not to take global warming or energy security very seriously at all. Rather these public concerns are just a convenient hook, the cause du jour, on which to hang their favorite solutions. If global warming matters – and it does; if energy security matters – and it does; then early action is clearly called for, particularly given the cumulative nature of GHG gases. But somehow the things easily done and carrying with them little in the way of disruption or public costs – carpooling, telecommuting, dispersed work – are largely written off. Such immediate, low-cost actions as highway operations strategies including better traffic signalization, improved traveler information and accident response systems receive little emphasis.

    Overall, the treatment of costs and benefits will leave readers gasping:

    • Travel times don’t get counted – so shifting from a 15 minute car trip to an hour on transit or walking has no penalty.
    • Transit subsidies don’t get counted – so doubling subsidies to increase ridership has only benefits.
    • Every possible pricing strategy is invoked – congestion pricing, cordon pricing, on-street parking fees, extreme fuel prices – in order to get people out of cars, and then the loss of their cars is counted as a benefit.

    At the same time the benefits and the costs involved are so corrupted to be meaningless. It will take weeks for analysts to tease out what really was done in the way of assumptions to create winners and losers. And there is no effort to tally all the costs exacted on the average household, or the typical business or even governments for that matter. The costs would add up to a permanent recession.

    I am sure the millions affected by these policies, particularly the middle and working class people who can now just barely afford a car, who would be priced out of the system by these policies, will say thank you for this “benefit”.

    As we work our way through the recession, workers will be willing to travel farther and farther to find the right job – or any job. With continuing increased specialization in our society larger and larger market sheds for jobs and for workers, quality transportation will be critical to our national productivity. This is the work that transportation does and it is totally dismissed by this report. It can not be addressed adequately by rail or transit even with a complete radical reorganization of work and society.

    In order to further bolster their ineffective case the proponents use a tool called “bundles” in which packages of actions are assembled for their “synergistic” qualities and either given a boost or cut based on the assertion that some things work well together. How this was done is not explained. So land use plans, which will take 30 years to come to fruition, are coupled with carbon pricing policies in a sort of horse and rabbit stew, that help make density solutions seem effective.

    Those who see the solution of so many of our present ills by cramming people into ever higher densities miss the point. Residential density is one of the most fundamental choices households make. Changing residential densities to make transit work better is the smallest tail wagging the biggest dog I can think of. It puts planning dogma ahead of the most basic human needs and rights.

    It is clear that most people, excepting a small but often very loud minority, opt for lower density living when income permits. As the society changes and choice patterns evolve, the marketplace must be ready to respond with development that is both responsive to household choices and to the demands of environmental needs. Any public policies that inhibit a market trend toward higher densities must be addressed. But the market place must be the final arbiter in a free society. People do not live “efficiently” in order to optimize some imposed societal goal, certainly not commuting.

    The serious work that needs to be done in this area still awaits an independent and credible group to undertake this work. It can’t come soon enough.

    For almost 40 years Alan E. Pisarski has been involved in the national transportation policy scene, from vantage points at the original Tri-State Transportation Commission in New York, the Metropolitan Washington COG, the Office of the Secretary, U.S. DOT, or in a personal consulting capacity. In his work he has measured the transportation activities of our nation from the metropolitan, state, national and international levels. In the U.S. DOT he organized the major travel surveys of the nation and designed and managed the U.S. transportation statistical system under the Assistant Secretary for Policy, establishing programs that are still the basis of much of the U.S. transportation statistical system today.

  • Bill Hudnut

  • Salinas Dispatch: A Silver Lining in the Golden State

    From a distance, a crisis often takes on ideological colorings. This is true in California, where the ongoing fiscal meltdown has devolved into a struggle between anti-tax conservatives and free-spending green leftist liberals.

    Yet more nuances surface when you approach a crisis from the context of a specific place. Over the past two years my North Dakota-based consulting partner, Delore Zimmerman, and I have been working in Salinas, a farm community of 150,000, 10 miles inland from the Monterey coast and an hour’s drive south of San Jose. Our work has been funded by a variety of sources, including the city, local business interests and the Chamber of Commerce.

    Our goal has been to find ways to promote upward mobility in the town, which is almost two-thirds Hispanic. Poverty is widespread, and gang problems rank among the worst in California. Unemployment, devastated by the recent recession, hangs at around 15%.

    These conditions are not at all unusual for inland California, and they are particularly prevalent in farm regions. In the Central Valley, over the next range of mountains, conditions are far worse, with some communities losing thousands of acres in production and unemployment rushing upward of 40%.

    One liberal journalist, Rick Wartzman, recently described the vast agricultural region around Fresno as “California’s Detroit.” As environmentalists push to cut back on water supplies and protect fish populations in the San Francisco Bay Delta, Wartzman notes, its local workers and businesspeople “are fast becoming a more endangered species than Chinook salmon or delta smelt.”

    In Salinas, where water comes from local aquifers, wells and the Salinas River, death seems less imminent, but there is a profound sense that things may be deteriorating. Local growers worry about regulatory constraints that will drive up costs to meet new state greenhouse gas standards. They also fear a possible county initiative, promoted by the well-funded local greens, to ban the growing of genetically modified foods.

    The growers’ response to the pressure – as with other businesses in California – is not to quit but to scale down operations. Some are cutting back thousands of acres of lettuce and other green crops that have been the prime business for the area for nearly a century.

    Yet we also see many reasons for hope. Salinas remains a unique place with an amazing richness in what the French call terroir, a combination of climate and soil. The city’s most famous son, John Steinbeck, wrote of the Valley’s unique topography:

    “The high gray-flannel fog of winter closed off the Salinas Valley from the sky and the rest of the world. On every side it sat like a lid on the mountains and made of the great valley a closed pot.”

    Growing conditions in Salinas cannot be easily duplicated elsewhere. Its richness has created a cornucopia responsible for the predominant part of the area’s private-sector employment.

    But it’s not just physical factors that make Salinas – and California – so productive. People matter too. The area is populated by scores of hard-driving agricultural families, people whose forebears transformed the place into the “salad bowl” of a nation. By 1952, when Steinbeck published East of Eden, Salinas produced 70% of the nation’s lettuce and much of its fresh vegetables.

    Salinas’ growers are not hereditary gentry; talk to local farmers and you find people whose roots lay in Italy, Portugal, Ireland, Japan and, increasingly, Mexico. “People, if given opportunity, can accomplish anything,” notes Lorri Kester, CEO of Mann Packing, a leading broccoli producer. “Many of the firms that lead us now were started by ‘Okies’ who worked the land. Now we see the same things with Latinos who started out as hands and now are foremen or managers.”

    What the Salinas growers do best – like their high-tech counterparts up in the Santa Clara Valley – is innovate. Working with the USDA and University of California-Davis scientists, they have led the way in creating new strains of vegetables and new ways of marketing, including the notion of “salad in a bag.”

    But not all the knowledge that makes Salinas such an economic powerhouse comes from entrepreneurs or PhDs. Like many agricultural communities, Salinas has had a sometime brutal labor history, particularly in the 1930s. The worst of this is now thankfully over, but farm labor remains a tough and often unrewarding profession.

    Yet even the hardest-edged growers acknowledge the importance of their labor force. Although education levels remain relatively low, our research revealed an extraordinarily high concentration of people with practical skills that can be applied to growing the agricultural economy. Future mechanization may reduce the overall employee counts but will make growers even more dependent on skilled workers in the fields.

    This proficiency, acquired in the fields and the processing sheds, has helped create another product for the Valley: expertise. Salinas growers, foreman, irrigation workers and marketers now sell their knowledge in other parts of California, as well as to Arizona, Mexico and, increasingly, East Asia. “I am seeing a lot of product and technical products from Salinas go to China and elsewhere,” notes Frank Pierce, a local agricultural consultant.

    Salinas also teaches you to avoid the great distinction made by many pundits between the “knowledge” industry and the productive type that focuses on tangible goods. A successful economy draws on information but also creates real products. There is a relationship between the two that is dynamic and has long been a critical component of California’s economic vitality.

    This is not just true of Salinas. I learned long ago from the founding fathers of Silicon Valley – people like Intel founder Bob Noyce and venture capitalist Don Valentine – that the practical knowledge from making circuits and chips helped create the Valley’s unique engineering terroir. Similarly, the “magic” of Hollywood does not emerge full-blown from the brain storms of stars and moguls. The entertainment complex’s unique abilities grow from the interplay of practical knowledge of less glamorous camera people, grips, editors, caterers and prop-managers servicing what Angelenos invariably refer to as “the industry.”

    Sadly, this insight largely has been lost on California’s political and business leadership. Among the so-called “progressive” community, production of any kind, outside of small artisanal farms or funky software shops, is disdained.

    This anti-development ethos has gained extra traction by claims that large farms and factories might add to the “carbon footprint” of a given place. Among well-funded foundations and some corporate leaders there remains an implicit sense that California can still mine enough riches in cyberspace to support the vast hoi polloi.

    Yet in reality, Californians need hard jobs, even mundane ones. The farm, sound stage or electronics factory provide the employment essential to broad-based prosperity. And when those jobs leave California they usually migrate to a place – whether over the border or abroad – where wages are lower and environmental controls are far weaker.

    This is not to argue that California’s right has the answers either. Lower taxes are generally preferable to higher ones. But in Salinas – and California – sometimes higher taxes might be preferable to cutting services, like the critical training offered by community colleges, which make the economy work and offer hope to the younger generation.

    In Salinas, Mayor Dennis Donahue, a Democrat of the Pat Brown variety, has embraced a call to raise the sales tax in order to maintain basic services. It’s not an ideal solution, but in the real world of running a city, particularly one with a big gang problem, you don’t want to cut back on police and libraries or add to already surging unemployment.

    What California needs most now is what it’s most missing: common sense and a sense of balance. This is what we learned in Salinas. California cannot be saved by ideologies – it needs to be saved from them.

    To be sure, preserving the land and air quality should remain a priority; it is the basis of California’s riches and unique appeal. But sustainability – the great buzzword of our time – needs to apply not only to the environment but also the economy and society. The right-wing solution of lower taxes even at the price of eviscerating the public sector and letting the infrastructure deteriorate does not constitute a program for long-term prosperity.

    We prefer an approach that focuses on practical steps for private and public sectors to collaborate on restoring economic growth. In Salinas, this means establishing – through cooperation with Hartnell, the local community college – a center for the development of agricultural technology. Salinas could use its combination of intellectual and grassroots knowledge to become the Silicon Valley of the “fresh” economy. It would also serve as a center of practical research on E. coli and other diseases that threaten the entire agricultural industry.

    Another step would be to expand the area’s thriving wine corridor to promote the region’s vintages. And there needs to be a plan to restore the historic central core into a bustling business district and to attract the predominately Latino shoppers, now lured to malls and outlet centers outside the city, back into town.

    These steps will take effort and money, but neither free market ideology nor green zealotry alone will get it done. California’s greatness was created not just by entrepreneurs or through its public sector, but in a clever, pragmatic melding of the two. Blessed with resources of topography, climate and human skill, our state should not allow dueling extremes to turn a global paragon into a planetary laughingstock.

    This article originally appeared at Forbes.

    Joel Kotkin is executive editor of NewGeography.com and is a presidential fellow in urban futures at Chapman University. He is author of The City: A Global History. His next book, The Next Hundred Million: America in 2050, will be published by Penguin early next year.

  • The Dollar: Running on Reserve

    During the recent financial crisis, I didn’t meet anyone else who was invested in stocks and bonds. I guess I was the only one. Everyone else was holding “cash,” as they often quietly boasted. But even if your money is kept under a mattress, cash is best understood as a zero-coupon bond, in most cases drawn against an overdrawn nation-state.

    Cash may be king, but the sovereign looks more temporary than a Romanov heir living in a rented villa in the south of France.

    The risk comes about because, in order to be held in any amount, money has to be deposited in banks, of course, which during the crisis wiped away more investor capital than did Bernie Madoff. (At the end of 2006 Citigroup had a market cap of $273 billion; today it is $16 billion. And at least it stayed in business.)

    Before getting into the ability of the Obama administration to spend and borrow further, and the wisdom of those who hoard cash, a bit of perspective:

    Paper money had its origins as bills of acceptance. The bearer of the circulating note could present documents at a warehouse and collect (should no cash be on hand) bales of cotton or coffee.

    Subsequently, governments decided that they, too, ought to be in the wealth creation game, and they began issuing national currencies. Literally and figuratively, depending on what was stirred into the vats of the paper companies, the deals amounted to money for old rope.

    In some societies, bondholders (that is, all those with folding money in their wallets) demanded convertibility of currency into silver or gold. In countries off a gold or peg standard, however, money amounts to little more than an unsecured loan to a national government, which today is the best way to think of the American dollar.

    During Reconstruction, the divide in the United States was between those that demanded a currency exchangeable into gold (Wall Street banking houses) and those that wanted convertibility into silver, if not wheat, corn, or sorghum (farmers).

    Not surprisingly, despite the eloquence of William Jennings Bryan, the gold interests defeated the farm lobby, which made it impossible for loans to be repaid with cheap — that is, inflated — dollars.

    The American money supply became a function of gold purchases and production, if not hostage to the fortunes of price fixes, corners, and oligopolists, who loved nothing more than to squeeze the economy into periods of recession. Deflation, when general prices fall, is a banker’s best friend, as it takes that much more “real” money or hard assets to repay a loan denominated in gold-backed dollars.

    The strength of the American dollar was confirmed in the 1944 Bretton Woods conference in Washington, which both fixed the international price of gold and the supremacy of the greenback. Suddenly the dollar was as good as gold. Why mine or buy gold when you can print it?

    Nothing other than the U.S. government’s promises restricted the amount of dollars that could be issued into world markets. No world central bank actually monitored the ratio of circulating currency and gold reserves, and few with dollars ever went to the Treasury to swap cash for gold ingots.

    The costs of the Vietnam War and the Great Society forced the dollar off the gold standard in 1971. To pay for the guns and butter, Washington increased the money supply (printed dollars). The only monetary constraint was the supply of ink and paper.

    For a while trade partners continued to accept payment in dollars, believing that the U.S. economy was stronger than any other. The dollar might have “floated” in relation to other currencies, but at least it wasn’t the Russian ruble or the Argentine peso.

    The problem with floating currencies is that they are susceptible to runs should the issuing country run up budget or trade deficits. Why should anyone lend money to a bad business just because the enterprise is a country with a flag?

    As U.S. deficits increased, global investors edged away from the dollar into the German mark, the Japanese yen, the Swiss franc, the Euro, and more recently baskets of Asian currencies.

    Which brings us to today. Only goodwill (defined both as an accounting term and as political deference to military might) now supports the U.S. dollar as a reserve currency, which is what allows the United States to issue dollar-denominated bonds in world money markets.

    It is this borrowing capacity that allows the Obama administration to bailout the banking industry, offer to pay for universal health care, fight colonial wars in the Middle East, stimulate the economy, send billions to Egypt and Israel, buy out General Motors, and subsidize every windmill start-up company in Nancy Pelosi’s home district. (Madoff’s problem was that he failed to set himself up as a country. He otherwise understood deficit spending.) But the shell game requires full faith in the dollar.

    For those riding out financial storms by “sitting on cash,” here is what’s under your seat: in recent months U.S. federal debt has grown to $11.3 trillion, almost equivalent to gross domestic production. About one quarter of this indebtedness, or $2.8 trillion, is held abroad, and China and Japan hold just under half of those assets (liabilities to Uncle Sam).

    Elsewhere on the American balance sheet is another $11.4 trillion in household debt, an annual trade deficit of about $725 billion, and a federal budget deficit that is estimated in 2009 to be approaching $1.8 trillion. That’s if the economy grows at 3 percent.

    Off-balance sheet risks, what accountants call contingent liabilities, include about $10 trillion in new bailout guarantees (Fannie Mae, Bear Stearns, Countrywide, and whatever the administration launches as its New Deal of the Day). None of the above includes the unfunded liabilities of Social Security ($41 trillion), which, by comparison, make the shares of Lehman Brothers and AIG look like Scottish bonds held for widows and orphans.

    The geese laying the golden eggs of U.S. financial stability are the printing presses of the U.S. Treasury, and, for now, those collecting them in their Easter baskets include a number of countries and regions perhaps tiring of American arrogance, if not of the drop in the dollar’s value. Who would blame such popular targets of moral abuse as China, Russia, Switzerland, Arabia, or Latin America for dumping their dollar-denominated assets?

    All that lies between the U.S. dollar and a financial Armageddon is the Faustian house of credit cards under which Asian economies invest their trade surpluses in U.S. Treasury instruments — to keep the dollar strong, their own currencies weak, and purchases brisk between the likes of Wal-Mart and the Asian Greater Co-Prosperity Sphere.

    Sooner than we think, China and Japan, like all nervous creditors, may send the United States a letter, suggesting that, henceforward, if Washington needs to borrow money, the bonds be issued in renmimbi, yen, or a basket of Asian currencies (a Pacific Euro).

    Wall Street bankers did the same to the farm interests in the late nineteenth century, when they insisted that debt be based on a gold standard, as opposed to “free silver.” President Obama may be as eloquent as William Jennings Bryan. But at that point he will need to use all his oratory for the business of selling junk bonds.

    Matthew Stevenson was born in New York, but has lived in Switzerland since 1991. He is the author of, among other books, Letters of Transit: Essays on Travel, History, Politics, and Family Life Abroad. His most recent book is An April Across America. In addition to their availability on Amazon, they can be ordered at Odysseus Books, or located toll-free at 1-800-345-6665. He may be contacted at matthewstevenson@sunrise.ch.

  • Britain, the Big Blue State

    This week in the UK saw the publication of a much-awaited report on social mobility. Member of Parliament Alan Milburn chaired the “Panel on Fair Access to the Professions,” which studied which segments of the British population are advancing upward into the professional class. The report has generated coverage and discussion in nearly every media outlet. So what did the report conclude? Essentially, it found that, in increasing measure, the more affluent a child’s family, the more likely he or she will get a professional job such as a lawyer, doctor, or teacher, while children in poorer families will not. It further concludes that the UK’s track record on social mobility is not good and, since professional jobs require higher educational attainment, education reform must be a top priority in the next British government.

    In some ways, these conclusions were anti-climactic, because they repeated what observers of intergenerational mobility have already seen, namely that the UK has had flatter social mobility compared to other European countries (consider this Sutton Trust report). And it’s hardly news that the present economy places a premium on services and knowledge-based industries, which in turn makes education all the more important. The report, as a product of a Labour government, should be applauded for going so far as to recommend school vouchers as a way to improve educational attainment.

    But the report’s logic regarding the “professions”—those valuable occupations that hold the key to upward mobility—has gone untested in the media’s coverage of the findings. The report claims that there are currently 11 million jobs in Britain that qualify as “professional” occupations. The largest single group within this elite cohort is listed as “local government,” which accounts for 2.25 million jobs. The next largest is NHS, the UK’s national health program, at 1.4 million. The third largest is teaching at 700,000, the majority of which are presumably government-funded salaries. Together, these three groups account for 40 percent of the total.

    Are the other 60 percent of professional jobs supposed to generate the tax revenue that will pay for the other 40 percent? Probably not. Financial sector jobs, which create a sizable portion of British GDP, are not included in the list of “professions.” Therefore it seems that an unstated aspect of the report’s logic is that the UK needs to ensure that financial services continue to generate enough income that can be taxed at high rates to pay for “ the professions.” Or, perhaps to be fairer, new types of professional jobs (the report cites a rapid growth in “creative industries” such as music, fashion, and TV) will be created to pay the bill.

    Either way, it is odd that a government report puts forward a strategy for increasing upward mobility that relies so heavily on government-funded jobs—especially considering that the government plans to tax top earners at 50 percent next year, a rate that would presumably affect a fair number of professional people. And all of this is on top of a general agreement that government spending needs to be reduced somehow in order for the UK’s economy to recover.

    Does this problem sound familiar? Regular readers will surely have noted Joel Kotkin’s important July 22 article on the meltdown in blue states, a key ingredient of which is bloated public sector employment. These are the same states that have relied upon the self-defeating strategy of raising taxes to pay for it all. And these are the same states that have a disproportionate effect on the logic that Obama and Congress use to make economic decisions. Britain is, in some way, a big blue state. The U.S. is not yet a blue country. How and whether it increases the rolls of government-funded jobs as an overall percentage of the workforce will be a key indicator of how blue it becomes. This is clearly a live issue Obama’s healthcare, energy, and stimulus spending priorities.

    Ryan Streeter is a senior fellow at the Legatum Institute.

    This blog entry originally appeared at The American.

  • UK Green Path leads to Deindustrialization and Worsening Housing Shortage

    The First Secretary of State, Secretary of State for Business, Innovation and Skills, and Lord President of the Council, Peter Mandelson, together with Ed Miliband, the Secretary of State for Energy and Climate Change, have published The UK Low Carbon Industrial Strategy. They are claiming it promises an “economic revolution” but is in fact an environmentalist retreat from industrial production It is a disastrous strategy that will result in further de-industrialisation, supposedly with the aim of addressing a rather vague threat of climate change.

    Mandelson and Miliband insist The UK Low Carbon Industrial Strategy “can ensure that our economy emerges from the global downturn at the forefront of the technological and social shift that will define the next century.” Yet this is typical establishment “greenwash”, which many institutional and corporate leaders of the construction industry will sadly rush to endorse. It will shift us towards the laborious construction of new eco-homes, and the laborious refurbishment of the stock of mostly draughty, poorly insulated, and badly serviced housing. All this is aimed to achieve, at least on paper, a contribution to a national carbon reduction target by 2020.

    Government thinks that it will be building 240,000 “zero carbon” homes every year by 2106. In fact at least 500,000 homes are needed every year to meet household growth and replace the oldest of the stock at a rate of 1% a year. Yet in reality this year new house building is down to 100,000 a year, and there is no reason why that level of production will increase even when, as is starting to happen, house price inflation returns. Instead of promoting mass production, most house builders are quite likely to follow The UK Low Carbon Industrial Strategy to become luxury eco-home builders. They will be content to build around 100,000 “green” homes a year to get through the planning system. They will build homes that show their environmental credentials by the thickness of walls and roofs – full of sheep’s wool or hemp, packed with straw bales, or made from low-fired clay blocks.

    This, of course, is the approach to new house building promoted by Prince Charles and the other would be green gentry. He advocates “the use of local materials to create local identity which, when combined with cutting-edge developments in building technology, can enhance a sense of place and real community.” Just as Mandelson and Miliband claim theirs is an industrial strategy, Charles promotes green building technology.

    Charles talks of building walls and roofs thickly in “volume”, but what does his royal greenness know of the market? Government also imagines it can use renewable insulation materials to produce “affordable” housing. Walls and roofs will get thicker, but housing will not be built in sufficient quantity for a growing population, and will not be affordable on most British household incomes.

    The green tendency will be to use greater thicknesses of less processed, more laborious-to-install insulation materials, cut-to-fit on site. This will make the walls and roofs on new eco-homes around half a metre thick, but that might be fashionable. Having more material in the walls and roof will show how little energy is used in the new and expensive eco-home.

    Thick insulation is an immediate problem in the refurbishment of the stock of 26 million existing houses and flats. It is not always possible to cover the outside with great thicknesses of natural materials that, contrary to the Prince’s claim, have a low capacity to insulate. Even industrially produced fibres and foams, which green purists think are too processed, must be used thickly. It is less possible to apply thicknesses of insulation inside the existing home, when most British homes are so small. A lot of filling of masonry cavity walls has been carried out under energy efficiency schemes, with little regard for why the drained air cavity was there in the first place. But no existing housing has walls with cavities of up to the 300mm that would be required for insulants that satisfy greens.

    The architectural fact is that only made-to-fit insulation, prefabricated as an industrially processed product, can achieve the thermal performance being discussed with a minimal thickness.

    Sheep’s wool and hemp, straw bales, and low-fired clay blocks are positioned increasingly off the scale to the right on thickness. Foam glass as an industrial product is poor as an insulant, as is cellulose fibre. The sorts of glass and mineral fibre insulation that can be bought in any builder’s merchant require substantial thicknesses. Foams have better performance, and are familiar as cut-to-fit insulation. However only the use of processed vacuum insulation, as a made-to-fit industrial product reduces insulation thicknesses to the architectural dimensions required.

    On behalf of New Labour Miliband boasts that Britain has produced a carbon reduction plan to 2020 that should inspire other industrial and industrialising nations. “Having been the first country in the world to set legally binding carbon budgets, we are now the first country in the world to assign every department a carbon budget alongside its financial budget,” he told the House of Commons. We seem to be the first country in the world to ignore the space- and time-saving potential of construction technologies that require energy in their production processes, but save energy in the long term operation of well serviced buildings.

    Britain is retreating from industry and makes an environmental fetish out of bulky “natural” materials that don’t work well. Why favour materials that are lightly processed as agricultural crops, or are low-fired but need rendering? Why not accept processing, as all timber is processed, and welcome the durability of fully fired bricks? This carbon obsessed idiocy in construction works against other great materials like concrete, glass, steel and aluminium.

    For their part government is insisting that insulation must be renewable and crop-based rather than an industrially processed product. This means that small British houses and flats will be thickly walled and roofed and will be built in too few numbers to accommodate British household growth. Every existing home must be refurbished indefinitely. That is truly pitiful for an old industrial democracy like Britain.

    Government abuses the words Industrial and Strategy, sharing the Prince’s low aspirations for twenty-first century construction and architecture. An industrial strategy worthy of the name would promote the development of highly processed vacuum insulation, and would expect skills in design, manufacture, installation, and maintenance.

    An attempt to make “green jobs” rather than raise productivity and wages, The UK Low Carbon Industrial Strategy should be seen and criticised as an environmentalist strategy of de-industrialisation, because that is precisely what it is.

    Ian Abley, Project Manager for audacity, an experienced site Architect, and a Research Engineer at the Centre for Innovative and Collaborative Engineering, Loughborough University. He is co-author of Why is construction so backward? (2004) and co-editor of Manmade Modular Megastructures. (2006) He is planning 250 new British towns.

  • Globalization Leads to Civic Leadership Culture Dominated by Real Estate Interests

    “Cleveland’s leadership has no apparent theory of change. Overwhelmingly, the strategy is now driven by individual projects. These projects, pushed by the real estate interests that dominate the board of the Greater Cleveland Partnership, confuse real estate development with economic development. This leads to the ‘Big Thing Theory’ of economic development: Prosperity results from building one more big thing.“

    Ed Morrison wrote the above about Cleveland, but he could have been describing any number of other cities. Why is it that so many cities have turned to large real estate projects to attempt to restart growth, turning away from strategies that previously made them successful?

    The answer possibly lies in structural economic changes resulting from the nationalization and globalization of industry. Up until the 1990s, many businesses – including retail, utilities, some manufacturing, and especially banking – operated on a regional or local basis. This meant that the civic leadership of a community was heavily dominated by businessmen, again, especially bankers, whose success was dependent on the overall macroeconomic health of the particular city or region they were located in.

    But with banking deregulation, we saw large numbers of hometown banks merged out of existence. Industry after industry was subjected to national or international level roll-ups as changes in the economy and regulatory environment gave increasing returns to scale.

    Why is it that “real estate interests” dominate in a local economy like Cleveland? Because, to a great extent, they are among the only ones left. Consider the local industries that were not as subject to roll-ups. Principal among these are real estate development, construction, and law. This means the local leadership of a community is now made up of executives in those industries, and they bring a very different world view versus the previous generation.

    Consider the difference between a banker and a lawyer. Banks make money on the spread between what they pay for deposits or wholesale funding, and what they charge for loans. This means the CEO of a bank is making money while he plays golf at 3. He’s got a cash register back at the office that never stops ringing.

    By contrast, lawyers get paid by the hour for work on specific matters and transactions. The law partner is only making money on the golf course if he is closing a deal. It’s similar between many other “operational” businesses that were previously prominent in communities, and the “transactional” businesses that are now often dominant.

    Additionally, even where the hometown bank or company did not get bought out, it likely escaped that fate by getting big itself and making large numbers of acquisitions or otherwise expanding. This means those institutions are less dependent on the health of the particular local market they happen to be headquartered in than they are overall macroeconomic conditions. While no doubt they want the headquarters town to be successful, not least of which so they can effectively recruit talent, they can afford to take a portfolio view of local markets.

    Not only has the drying up of local and regional operating businesses led to a business leadership community unbalanced in favor of transactionally oriented firms, the loss of those local and regional operating businesses robbed many of the transactional companies such as law and architecture firms of their principal local client base. Large national businesses employ national firms for advertising, law, architecture, etc. If they use local firms, it is in a subsidiary role. (Or, if a smaller firm is fortunate enough to land a contract, it is servicing a client on a national, not local basis).

    Richard Florida described this in his Atlantic Monthly article on the financial crash. “As the manufacturing industry has shrunk, the local high-end services—finance, law, consulting—that it once supported have diminished as well, absorbed by bigger regional hubs and globally connected cities. In Chicago, for instance, the country’s 50 biggest law firms grew by 2,130 lawyers from 1984 to 2006, according to William Henderson and Arthur Alderson of Indiana University. Throughout the rest of the Midwest, these firms added a total of just 169 attorneys. Jones Day, founded in 1893 and today one of the country’s largest law firms, no longer considers its Cleveland office ‘headquarters’—that’s in Washington, D.C.—but rather its ‘founding office.’”

    Where then is the source of transactions these firms can turn to in order to sustain their business? The public sector, of course.

    I would hypothesize that many local transactionally oriented services companies have seen the public sector take on a greater share of billings than in the past. With the old school bankers and industrialists mostly out of the picture, the leadership in our communities consists increasingly of the political class and a business community dominated by transactional interests.

    When you look at the composition of this group, it should come as no surprise that the publicly subsidized real estate development is the preferred civic strategy. Politicians get to cut ribbons. Cranes always look good on the skyline. Local architects, engineers, developers, and construction companies love it. And there is plenty of legal work to go around.

    This is not to say these people are acting nefariously. And nor were old school bankers and industrialists always acting purely altruistically. Rather, the difference comes from the world view and “theory of change” that people steeped in transactionally oriented businesses bring with them.

    With the current financial crisis, bigness, as a strategy, is out of favor for the moment. Also, the gimmicky financial transactions that underlie much of the crisis are calling the entire transactional model into question. There’s an increasing alarm at the precipitous decline of manufacturing, particularly the auto sector. And people are questioning whether we as a country can survive simply through services, or whether we need to revitalize the concept of the operational business and actually making things. Plus, real estate deals are tougher to get done because of tight credit, and it seems unlikely that the go-go days of recent years are coming back soon.

    We’ll see where this leads. But if we see more local and regional scale operating businesses start to emerge again, then perhaps the urban development pendulum will start swinging the other direction again. In the meantime, large scale real estate development will likely continue to be preferred.

    Aaron M. Renn is an independent writer on urban affairs based in the Midwest. His writings appear at The Urbanophile.

  • Moving to Reloville, America’s Cross-Country Careerists

    Peter T. Kilborn’s Next Stop, Reloville: Life Inside America’s New Rootless Professional Class documents an important piece of social history: the lives of relocating corporate executives. These modern-day ­nomads—overwhelming white, well-educated and middle-class—maintain the business machine of large companies. They include the technicians, marketing executives and professional managers who accept a rootless life in exchange for handsome remuneration.

    Most of these people live in what Mr. Kilborn calls ­Relovilles, an archipelago of mostly newer, upscale suburban communities that includes places such as Alpharetta, Ga., Highland Ranch, Colo., Overland Park, Kan., and a series of Texas locales from Plano, outside Dallas, to the Woodlands on the periphery of Houston.

    In the many vignettes he provides, Mr. Kilborn portrays these executives and their families in a dispassionate, even sympathetic manner. We meet Jim and Kathy Link, who have moved seven times in a little more than 10 years as Mr. Link pursued a career in selling ­employee-benefit services. The author rides along with Kathy as she shuttles the kids to ­soccer practice,and he tracks the buying and selling of the Links’ homes. “The basement is approximately the same size as my parents’ entire house,” says Jim, marveling at how much house his $200,000 annual ­income bought in Alpharetta.

    We also meet Matt Fisher and his family. He’s an inventory-management specialist who, we’re told, has “averted dead-ending his career by mining his network of contacts to move from Chicago to Cleveland, to Columbus, to Houston, and ­finally to Flower Mound,” in Texas. Matt explains: “You can escalate your career if you want to move around. The ones who don’t move around don’t get the calls . . . because ­nobody knows who they are.”

    Although Mr. Kilborn is clearly an advocate for the ideal of rooted, organic ­communities—a value shared by many of the “Relos” in his book—he evinces none of the snobbish dismissal of middle-class values and aspirations that one finds in the work of new urbanists such as James Howard Kunstler or Andres Duany. Yet despite the appealingly sensible outlook of ­“Reloville,” the book does not rise to the level of the great social histories, such as ­Herbert Gans’s “Levittowners” or even Alan Wolfe’s “One ­Nation.” Mr. Kilborn’s work lacks both the statistical rigor and deep historical perspective found in the best such works.

    Mr. Kilborn also falls into something of the old journalist’s trap: trying to sell your story as something bigger than it is. He calls the Relos “a disproportionately influential strain of the vast middle class.” Yet in many ways they may not be as important as he suggests.

    Overall, Mr. Kilborn estimates the total Relo population at around four million in 2007. The number includes something like 800,000 households that are moved every year by companies in the U.S.—not an insignificant group but hardly a major one in a country of more than 300 million people.

    Despite his claims of their significance, Mr. Kilborn ­acknowledges that the Relos are far from “masters of the universe” who actually shape economies and societies. In fact, most are more the servants of top management than people in control of their own destinies. They are, Mr. Kilborn notes, “twenty-first-century heirs of William S. Whyte’s ­‘Organization Man,’ who ­exchanged the promise of job security and a pension for his loyalty and toil.”

    Yet it seems clear that the whole world of “The Organization Man” of the 1950s—predicated on stable employment— is shrinking, and rapidly. The days of large corporate ­organizations with a secure cadre of midlevel executives seems ­itself an anachronism. Companies routinely restructure their bureaucracies and outsource—to smaller independent firms domestically as well as to firms overseas. Relos may represent less the wave of the future than a stubborn ­hangover from the past.

    One critical reason for the reduced need to uproot workers is new telecommunications technology. For generations, IBM was instrumental in shaping the Relo group that Mr. Kilborn describes. After all, this was a company with initials that, executives joked, really meant “I’ve been moved.” Yet today IBMers are not as mobile as in the past—not in terms of physical movement anyway. As much as 40% of the IBM work force operates full-time at home or remotely at clients’ businesses. For members of the company’s highly regarded consulting practice, the percentage is even higher—they’re logging frequent-flyer miles, and piling up points at ­Residence Inns, not putting down even shallow roots.

    Perhaps even more important may be social changes that could make Relos less relevant in the future. For decades in the post-World War II era it was believed that “spatial mobility” would increase, hastening social disintegration. This vision was epitomized in Vance Packard’s 1972 best-seller, “A Nation of Strangers,” with its vision of America as “a society coming apart at the seams.”

    But in fact, far from becoming ever more nomadic, Americans are becoming less so, as the population ages and as ­formerly urban amenities are more widely dispersed and ­accessible. As recently as the 1970s, 20% of Americans moved annually; by 2004 the number had dropped to 14%— the lowest since 1950. By 2008, barely 10% were relocating.

    These days human-resource executives complain that workers are increasingly unwilling to move even for a promotion, citing family and other concerns. With the recent economic downturn, worker ­mobility in the U.S. has waned further. The decline in the relocation tradition seems likely to persist in good times or bad.

    Even the denizens of ­Relovilles who bought houses under the assumption that they’d be selling and moving on after a few years are now deciding to stay put. And formerly transient communities are evolving into something more permanent. Recent interviews that I conducted in the Woodlands, near Houston—one of the Relovilles identified by the author—revealed a growing sense of community, with some three-generation families now settled in the area.

    Over the past 40 years the institutions of community have emerged in the Woodlands. For example, a well-managed and expansive social-service organization called Interfaith has risen to take care of many needs, from welcoming new families to providing services to children and seniors. A well-attended cultural center has grown up in the town, as has something of a Main Street shopping district. The Woodlands is shedding its past as a generic Reloville and becoming its own place.

    Urban critics might see these evolving Relovilles as too faux for their tastes, but they do hint at a more rooted, less mobile suburban world, far more human than that envisioned by many futurists over the past few decades. Mr. ­Kilborn’s “Reloville” may turn out to be less about America’s social future than a fair and well-written chronicle of a ­phenomenon that is slowly, but inexorably, relocating into the history books.

    This article first appeared in The Wall Street Journal.

    Joel Kotkin is executive editor of NewGeography.com and is a presidential fellow in urban futures at Chapman University. He is author of The City: A Global History. His next book, The Next Hundred Million: America in 2050, will be published by Penguin early next year.

  • Elected Official Domestic Migration from San Francisco?

    San Francisco, like every other core county in a metropolitan area of more than 1,000,000 (with the exception of New Orleans) continues to lose domestic migrants. Between 2000 and 2008, US Bureau of the Census data indicates that more than 10 percent of San Franciscans have left for other counties. But if one is a member of the San Francisco Board of Supervisors (board of county commissioners), it may be convenient for only part of the family to join the exodus.

    According to the San Francisco Chronicle Supervisor Chris Daly moved the wife and kids to exurban Fairfield, claiming that the environment was better there for the kids, since they would live closer to their grandparents. Doubtless the environment will be better there for the kids in a lot of ways – more places to play, a safer environment and probably better schools.

    What’s more, the Supervisor moved the family to a cul-de-sac, that urban form most despised by the most orthodox urbanites.

    It is understandable that Supervisor Daly himself did not move, announcing that he continues to “eat, sleep and bathe” in his San Francisco home. Don’t be surprised, however, if when Supervisor Daly’s term expires, he should find the shower and bathtub more to his liking in the exurbs.

  • Follow the Money: Special Inspector General for the Bailout

    The House Committee on Oversight and Government Reform held a critically important hearing on July 21 titled “Following the Money: Report of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP).” Sadly the mainstream media under reported the meeting. They focused on Federal Reserve Chairman Ben Bernanke telling the House Financial Services Committee “don’t worry,” but missed Special Inspector General (SIG) Neil Barofsky telling the Oversight Committee all the really sexy stuff: Conflicts of Interest, Collusion, and Money Laundering.

    Bernanke likes to tell us his Federal Reserve could take on a Super-Cop role, but the truth is quite the opposite. Reviewing the SIG report, Oversight Committee Chairman Edolphus Towns (D-NY) described it as “a wake-up call to the Treasury and the Fed that our financial system cannot be run behind closed doors.”

    Back in October 2008, Congress passed a bill to relieve the suffering caused by the Subprime Crisis. The Troubled Asset Relief Program (TARP) gave Treasury the authority to “purchase, manage and sale $700 billion of toxic assets, primarily troubled mortgages and mortgage-backed securities.” Within days, then Treasury Secretary (and former head of Goldman Sachs (NYSE: GS)) Hank Paulson unilaterally decided to take the money but to do something completely different with it – that is bail out his good-old friends on Wall Street.

    Representative John J. Duncan, Jr. (R-TN) noted that the banks that got TARP bailout money didn’t use it to help homeowners but to buy other banks, increase investments in China, improve their balance sheets and, now, report huge profits. This is not merely something that bothers grousing Republicans. Representative Dennis J. Kucinich (D-OH), one of the house’s most radical left members, called the TARP bailout program “one bait-and-switch after another…This is an ongoing fraud and deception on the American people.”

    We are committed to neither political party but agree that TARP has done precious little to help homeowners or the Main Street economy while performing wonders for Wall Street. There should be no surprise now that only 325,000 homeowners have been helped instead of the 4,000,000 we were promised.

    Since the October 2008 switcheroo, our elected officials in Congress have not been trying to stop Treasury or even rein the TARP beneficiaries. Real-Life Super Cop SIG Barofsky told the House Oversight Committee, “Treasury takes the position that it will not even ask TARP recipients what they are doing with the taxpayers’ money.” In some bizarre logic that only a Washington-insider could understand, they seem to think that if they don’t ask, they don’t have to tell.

    Not surprisingly Treasury is left trying to discredit SIG Barofsky’s report. According to Chairman Towns, the Rogue Treasury has “requested legal opinion from the Department of Justice challenging the Special Inspector General’s independence.” Representative Jason Chaffetz (R-UT) discretely pointed out that there is a distinct danger that the Secretary of the Treasury will try to stop Barofsky’s request for additional allocations to keep SIGTARP operations running past mid-2010. Representative Dan Burton (R-IN) called Treasury’s actions “blatant attempts to intimidate Barofsky to keep this information from the public.”

    Early news reports focused on just one number from the report: the potential for the government to spend $23 trillion to fix the financial system. Sadly the media ignored the most sinister – and more obvious to anyone who read even the summary of the report or merely watched SIG Barofsky’s testimony – issues raised in the report. Here are the ones that give me indigestion:

    • Treasury refuses to follow recommendations requiring fund managers to gather the information necessary to screen their investors for organized crime syndicates or terrorists. (page 183). In my 20+ years in financial services, one rule sticks in my mind: “Know Your Customer.” It means that you never do business with anyone you can’t vouch for, because financial intermediaries, like banks and brokers, must stand behind every transaction they put in the system – even if their customer defaults. So why is it that we are now funneling trillions of dollars through financial intermediaries who are not required to gather enough information from their investors so we can be sure we aren’t funding terrorism?
    • SIG Barofsky said that “Blackrock (NYSE: BLK) may have incredible profits under contracts with both Federal Reserve and Treasury.” Representative Marcy Kaptur (D-OH) suggested that SIG Barofsky “look at the people involved, not just companies like Blackrock” because the same people who created the subprime crisis are now working for the Federal Reserve on the bailout. They have the same staff investing government programs and private money without any “separating wall” to prevent conflicts of interest.
    • It appears that Treasury, the New York Federal Reserve and even Presidential Economic Advisor Larry Summers may be passing information to their friends that can be used for financial gain, giving positions in bailout programs to business associates, and engaging in “too cordial relationships” with bailout recipients, according to Representative Darrell Issa (R-CA), Ranking Minority Member of the Oversight Committee.
    • Treasury is “picking winners and losers” in the public/private partnership programs in a completely opaque process. SIG Barofsky calls this potentially “devastating to the public’s view of government.” People are hungry for information, too: The SIG’s website has received 12 million hits by people interested in getting copies of testimony and reports.
    • TARP is no longer a $700 billion bailout. “Treasury has created 12 separate programs involving Government and private funds of up to almost $3 trillion…a program of unprecedented scope, scale, and complexity” according to SIGTARP’s quarterly report to Congress.
    • Treasury and the Federal Reserve have ignored recommendations to stop relying on rating agency determinations. (page 184) They continue to rely on rating agencies – the same ones who made tragic misjudgments over the past two years – in making determinations about the prices we will pay for the purchase of “troubled assets” or “legacy assets” or whatever name they decide to apply to the junk bonds in the hands of private banks. By relying on the rating agencies (who played a role in the crisis by rating junk bonds as triple-A credits), the bailout programs run the risk of being “unduly influenced by improper incentives to overrate.”
    • Representative Dan Burton (R-IN) suggested that Treasury Secretary Geithner is deliberately attempting to keep information from the public. SIG Barofsky has been unable to get more than one meeting with Treasury Secretary Geithner since January 2009 – and then only for a few minutes. This arrogance is not new to the current Administration’s Treasury. Representative Issa says the Oversight Committee was twice promised data on the value of TARP assets from former Treasury employee (and former Goldman Sachs (NYSE: GS) employee) Neel Kashkari. That data was “never forthcoming.”
    • Treasury has “repeatedly failed to adopt recommendations essential to providing basic transparency and accountability.”

    Representative Issa concluded that SIG Barofsky has given us the facts; now it’s up to Congress to take action. In closing Chairman Towns said that if Treasury doesn’t turn over information voluntarily, Secretary Geithner will be brought before the Committee to answer. “I can now understand why the Treasury Department would like to rein in the SIGTARP. But we are not going to let that happen.”

    I can think of 23 trillion reasons why the Treasury Department will fight him all the way. And just as many why we taxpayers should not like Tim Geithner and the rest of the insider crowd getting away with the murder of the American economy.

    Susanne Trimbath, Ph.D. is CEO and Chief Economist of STP Advisory Services. Her training in finance and economics began with editing briefing documents for the Economic Research Department of the Federal Reserve Bank of San Francisco. She worked in operations at depository trust and clearing corporations in San Francisco and New York, including Depository Trust Company, a subsidiary of DTCC; formerly, she was a Senior Research Economist studying capital markets at the Milken Institute. Her PhD in economics is from New York University. In addition to teaching economics and finance at New York University and University of Southern California (Marshall School of Business), Trimbath is co-author of Beyond Junk Bonds: Expanding High Yield Markets.